Management Of Human Resources

Management Of Human Resources

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Management of Human Resources

HR is the key to organizational success or failure. HR policies and practices must be tired to overall organizational strategy. Discuss with examples, how the organization can develop competitive advantage through superior Human Resource Management.

In order to ensure organizational success, there are various things to keep in mind. Firstly we need to define the organization strategy. What is an organizational strategy? Kay states that strategy is about the achievement of competitive advantage which, in his view, is based upon an organizational identifying, developing and applying to relevant markets its distinctive capabilities, which are most often derived from the unique character of its relationships with its suppliers, customers or employees.’ The strategy would include aspects such as cost minimization which would involve optimum utilization of resources at minimum possible cost, this a traditional approach, on the other hand an organization could adopt profit maximization strategy which would involve taking risks and thus a more unconventional approach. Typically once the strategy is prepared the focus is on accomplishing these objectives. But how can this be done?

Do you remember the first day at work? It’s a mixed feeling of nervousness and excitement. You get all geared up to commence our first assignment and go to the managers cabin and get all the required details of the assignment. But what is the most crucial thing in order to ensure successful accomplishment of the assignment?
Alignment of Manager’s understanding of the assignment along with yours. This is essential because unless you don’t understand the manager’s point of view of the assignment and what he is trying to say you will be unable to fulfill it and similarly unless the managers doesn’t understand your point of view it will difficult to complete the assignment successfully.

Similarly, in order to fulfill the organizational strategy successfully the Human Resource aspect needs to be given importance as well in order to ensure competitive advantage, thus alignment of Human Resource Strategy and Organizational Strategy should be of prime importance to the management. Although this step is often missing in the process of strategy formulation.

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Gradually the importance of the alignment of the two strategies is increasing. Since the 1980s Human Resource has been given fair amount of importance in the organizations as the managements were slowly realizing that the employees are the backbone of the organization and they can either make or break the firm. Hence the focus was on careful planning of Human Resource strategy which including aspects such as Recruitment, Selection, Training & Development, Compensation. While deriving the HR strategy it is essential to align it with the business strategies and I am going to get into the details of it further on in the essay by illustrating a few examples of companies that are a part of the Fortune 500 companies have failed miserably due to unsuccessful alignment of the HR strategy to the organizational strategy. Kindly note that I have been using the term business strategy/organizational strategy inter changeably.
There are two types of theories, Theories X- These kind of companies focus on Industrial Engineering hence they focus more on work production and getting things done. They follow the Talyorist approach. This theory would be applicable to firms who focus on cost minimization. On the other hand, companies that focus of welfare maximization, follow Theory Y approach. They focus on Humanistic Management Philosophies and give importance to employee relationship. In order to sustain competitive advantage, companies put a higher premium on long-term cooperative relations with their employee. These relationships represent valuable firm specific investments, which are costly to replace and which the firm therefore seeks to protect by binding employees to the firm long-term.- Baron & Keps

Moving on, I will present comparison of 2 Fortune 500 companies, comparing the impact of aligning of Hr strategies with the organizational strategies.

International Business Machines(IBM) , one of the leading computer companies in the American industry. IBM was at its peak and doing considerably well in the 1960s and then the gradually started declining in the 1970s. IBM was a product oriented company and centralized in nature. They believed in delivering error-free products to the market. Conformity, teamwork and dedication were central norms. IBM was an attractive employer as it gave an opportunity to work with the best of industry, both in terms of human resources as well as technical resources. HR policies included factors like no-layoff guarantee, premium wages and outstanding working conditions. it also focused on career development of employee. It promoted team ply and team spirit. The strong internal culture helped to homogenize the different national and international nit of IBM. These policies were aligned very successfully with the HR policies. However, form 1978 the earning began to fall and this had no economic explanation to it. It was solely because of misalignment of the HR policies of the organizational strategies. The Hr strategies were being followed since 15 years, as the time progressed there was a change in the industry and IBM needed to modify their strategies. IBM needed to shift from the centrally directed product focus to a more market driven focus, in order to survive in an increasingly competitive environment. Secondly, the hierarchy needed to be eliminated and they need to introduce a more flat structure in the organization. Thus it got increasingly difficult for IBM to retain employees and keep them attached to the organization, as the external offers were more lucrative.
Second example of Hewlett Packard (HP), another Fortune 500 companies, into the Electronic industry, which portrayed a strong alignment among the firm’s HR practices. Hp was regarded as a pioneer in high commitment work system. They focused of progressive employment policies. They believe in ‘ creating an environment in which employees can fulfill their natural desires to do good, creative work. To complement the business strategy, HP has derived a suitable HR strategy, which focused on long-term employment, minimizing layoff and offering above market compensations, providing flexibility to workers in regard to work life balance. One of the striking features of the HR strategy is that if focused on internal promotion, and thus gave intensive training to the employees. This made the employees feel like an integral part of the organization and which then makes them work harder for IBM. Hence the strategies were consistent and very well aligned with each other. This strategy fits their business strategy of designing, manufacturing and then servicing top quality products. This clearly creates a competitive advantage showing that in spite of such cutthroat competition, HP has managed to retain its talented employees creating an edge over the other their competitors. Hence careful alignment of HR strategy with organizational objective ensures success both in terms of employee satisfaction leading of higher productivity, thereby increasing profitability finally leading to accomplishment of organizational objective.

Hence when we compare to the two examples, we can understand the reason for the downfall of IBM. Initially their alignment of the strategies was working fine but as time progressed they need to realign the strategies, which they failed to recognize. IBM’s bureaucracy, created a wide gap between the management and the employees, which leads to miscommunication of objectives. As the industry matured and involved IBM’s strategy became externally less fit leading to the downfall.
Similarly another example of inconsistency is the Portman Hotel, where there was a major misalignment of the HR policies and the business strategies. One of the main policies was the ‘do anything’ policies wherein the employees have the freedom to do what they want, however the HR recruitment strategy said otherwise. They wanted people who scored high on assertiveness and need for structure that of course does not align with the ‘do anything’ policy, leading to high employee turnover. Secondly, they believed in low compensation and at the same the employee were expected to lots of work, their job description was fairly broad and open ended, which demanded a high salary. Another factor which was unfair according to me was that the recruits were college graduate and trade school graduates hence their salary were not matching well with their education qualification. The management also considered employees as important asset of the organization, although when they were approached by employee complaints, and suggestions it was completely ignored, leaving the employees neglected.
These contradictory strategies led to occupancy rates dropping drastically, tip income being 1/5th of what was forecasted, and the guest confused regarding the role of the Personal valets, and at the same time high turnover rate of the Personal Valets.

Hence Human Resource is definitely the key to organizational success of failure, as we have clearly witnessed in the examples mentioned above. Misalignment could lead to breach of trust to the employees, which would reduce their loyalty towards the organization leading to lower productivity eventually leading to failure of organizational objectives.
I would like to conclude by illustrating a table below that links the 3 significant organizational strategies (typically followed by most organizations) to Human Resource policies and in turn the employee behavior towards. Implementation of these policies will ensure organizational success both in terms of wealth and wealth maximization

|Organizational Strategy |Employee Role Behavior |Human Resource Policies/Strategies |
|Innovation |A high degree of creative behavior |Jobs that require close interaction and |
| |Longer-term focus |coordination among groups of individuals |
| |A relatively high level of |Performance appraisals that more likely to |
| |cooperative, Interdependent |reflect longer-term and group-based |
| |behavior |achievements |
| |A moderate degree of concern for |Jobs that allow employees to develop skills |
| |quality |that can be used in other positions in the |
| |A moderate concern for quantity |firm |
| |An equal degree of concern for |Compensation systems that emphasize internal |
| |process and results |equity rather than external or market- based |
| |A greater degree of risk taking |equity |
| |A high tolerance of ambiguity and |Pay rtes that tend to be low, but that allow |
| |unpredictability. |employees to be stockholders and have more |
| | |freedom to choose the mix of components that |
| | |make up their pay package. |
| | |Broad career paths to reinforce the |
| | |development of a broad range of skills |
|Quality Enhancement |Relatively repetitive and |Relatively fixed and explicit job descriptions|
| |predictable behaviors |High levels of employee participation in |
| |A more long-term or intermediate |decisions relevant to immediate work |
| |focus |conditions and the job itself |
| |A moderate amount of cooperative, |A mix of individuals and group criteria for |
| |Interdependent behavior |performance appraisal that is mostly |
| |A high concern for quality |short-term and results orientated |
| |A modest concern for quantity of |A relatively egalitarian treatment of |
| |output |employees and some guarantees of employment |
| |High concern for process |security. |
| |Low risk-taking activity |Extensive and continuous training and |
| |Commitment to the goals of the |development of employees |
| |organization | |
|Cost Reduction |Relatively repetitive and |Relatively fixed and explicit job descriptions|
| |predictable behavior |that allow little room for ambiguity |
| |A rather short-term focus |Narrowly designed jobs and narrowly defined |
| |Primarily autonomous or individual |career paths that encourage specialisation, |
| |activity |expertise and efficiency |
| |Moderate concern for quality |Short-term results orientated performance |
| |High concern for quantity of output|appraisals |
| |Primary concern for results |Close monitoring of pay levels for use in |
| |Low risk taking activity |making compensation decisions |
| |Relatively high degree of comfort |Minimal level of employee training and |
| |with stability |development |

Source: Storey and Sisson (1993,p.66), adapted from Schuler and Jackson (1987,pp, 209-13)
Schuler and Jackson’s model of employee role behaviors and HRM policies association with particular business strategies.

Strategic Human Resources -Baron, James d.; Kreps, David m.
Strategic human resources published by John Wiley & sons, inc
Human Resource Management- Rhetorics and Realities, Karen Legge. Chp 4- HRM and ‘strategic’ integration with business policy.
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